OECDOECD

National Accounts Experts MeetingNational Accounts Experts Meeting

7 October 20037 October 2003

EUROSTAT TASK FORCES EUROSTAT TASK FORCES ON PENSION SCHEMES ON PENSION SCHEMES

IN 2003IN 2003

As a reminder, the 1992 TREATY establishing the European Union has set up a budgetary surveillance, the “Excessive deficit procedure” (article 104), reinforced for the euro-zone in the 1998 TREATY (“S.G.P”)

Eurostat, in this context, has a Eurostat, in this context, has a

leading role in statistical areasleading role in statistical areas

This has been recently confirmed in

a “Code of Best Practice”

endorsed by the ECOFIN Council

on 18 February 2003

“The Commission’s role as statistical authority in the context of EDP is exercised by

Eurostat, on behalf of the Commission”

A protocol in the 1992 Treaty specifies A protocol in the 1992 Treaty specifies reference to the system of national reference to the system of national accounts in force (ESA79 then ESA95)accounts in force (ESA79 then ESA95)

GovernmentGovernment means “general government sector”

DeficitDeficit means “net borrowing”

DebtDebt means financial instruments as defined in the system on a consolidated basis

In practiceIn practice

Further specifications were given in a

specific Regulation (European Council) including however some differences

from national accounts

but EXCLUSIVELY for:

Coverage of debt instruments andCoverage of debt instruments and

valuation (1993 and 2000)valuation (1993 and 2000)

Definition of deficit (2000)Definition of deficit (2000)

In this context, EurostatIn this context, Eurostat is assigned is assigned two major functionstwo major functions::

Controlling the compliance of data with

the accounting rules(assessment of data notified twice a year)

Specifying the rules and providing guidance

if the need arises

The main issues are:The main issues are:

Coverage of government sector (market or non-market ?)

Accruals

(when?)

Classification of transactions(transaction or “other flow” ?non-financial or financial ?)

“Exact” measure of government debt

(government liability?)

In this respect, EUROSTAT may act:In this respect, EUROSTAT may act:

On a bilateral basisbilateral basis for strictly national

issues

In a co-operative approachco-operative approach for issues considered as “of common interest”

BUT WITH A CORE PRINCIPLE:BUT WITH A CORE PRINCIPLE:

Similar cases Similar cases

in all Member Statesin all Member States

must have comparable effects must have comparable effects

on government deficit and debt on government deficit and debt

In the Co-operative approach, In the Co-operative approach, the procedure is :the procedure is :

Work by experts in a temporary Task Force (ECB as de jure member)

Report to permanent Working Groups (Financial Accounts, National Accounts)

Consultation of the CMFB (created in 1991)Final decision by Eurostat

THE USUAL RULES OF

PROCEDURES OF CONSULTATION

OF THE CMFB

HAVE BEEN “CODIFIED”

IN FEBRUARY 2003,

notably as regards time limits

Most the results of methodological Most the results of methodological issues that were considered are part issues that were considered are part of:of:

ESA 95 Manual on ESA 95 Manual on

government deficit and debtgovernment deficit and debt

2nd edition in 2002, 3rd planned in 20042nd edition in 2002, 3rd planned in 2004 New parts already available on the web New parts already available on the web

IN 2003 IN 2003 EUROSTAT HAS DECIDEDEUROSTAT HAS DECIDED

TO SET UPTO SET UP6 NEW TASK FORCES6 NEW TASK FORCESTwo were devoted to Two were devoted to

pension schemes issues pension schemes issues

CLASSIFICATION OF PENSION CLASSIFICATION OF PENSION SCHEMES SCHEMES

ESA95 includes rules but: ESA95 includes rules but:

-obvious room for interpretation -obvious room for interpretation

-recent reforms implemented in Member -recent reforms implemented in Member

States (and Acceding Countries)States (and Acceding Countries)

-need to clearly define the exact role -need to clearly define the exact role

(“responsibility”) of government units(“responsibility”) of government units

- risks of divergent classification in MS- risks of divergent classification in MS

•The TASK FORCE met twice and will meet again at end of October 2003 •The mandate is limited (interpreting, not changing, current ESA95) •The issue on employers’ schemes is not discussed (notably for civil servants) •A decision must be taken before the end of the year•There could be strong impact on government deficit (and on consolidated debt)

The Task Force has closely examined the ESA95 definition of a social security scheme:

- coverage of population

- “responsibility for the management” by government units

- meaning of words “imposed, controlled and financed”

The Task Force has also discussed:

- the difference between control and supervisory

- the consequence of minimum pension

- the consequence of minimum rate of return

- the management of social security schemes by non-government units

The decision will cover at least four The decision will cover at least four issues under consideration by the Task issues under consideration by the Task Force:Force:

1) “Defined-benefit funded schemes” 1) “Defined-benefit funded schemes”

In which conditions should these schemes be classified as social security scheme?

2) “Defined-contribution funded schemes” 2) “Defined-contribution funded schemes”

As pension are depending on market performance, should these schemes

never be classified as social security schemes?

3) Guarantees given by government 3) Guarantees given by government

Should the guarantees as such have no impact on classification except if they

are called or very likely to be called?

4) Cases of arrangements combining 4) Cases of arrangements combining funded and unfunded “legs”?funded and unfunded “legs”?

In which conditions should the funded “leg” be classified not as a social

security scheme?

TRANSFER OF EMPLOYER PENSION TRANSFER OF EMPLOYER PENSION SCHEME TO GOVERNMENT BY SCHEME TO GOVERNMENT BY

PUBLIC CORPORATIONSPUBLIC CORPORATIONS

A decision (as capital transfer) in 1997 A decision (as capital transfer) in 1997

but: but:

- implementation of ESA95 in 2000 - implementation of ESA95 in 2000

- currently, more attention given to “one-- currently, more attention given to “one-

off” transactions in GF monitoring off” transactions in GF monitoring

- conceptual grounds for possible - conceptual grounds for possible

reconsiderationreconsideration

•The TASK FORCE met only once in June •Some new cases were examined but the work focused on conceptual rationale•Only the transfer of unfunded scheme was considered •The TASK FORCE had not the mandate to change ESA95 as regards government liability in the case of unfunded schemes•A CMFB consultation is on process •A decision will be published before end of October

Two options have been submitted to Two options have been submitted to the CMFB for opinion as regards the the CMFB for opinion as regards the “lump-sum” paid to government:“lump-sum” paid to government:As a non-financial transaction (transfer) As a non-financial transaction (transfer)

- positive impact on deficit off-set by future benefits paid by government

As a financial transactionAs a financial transaction

- no immediate impact on deficit

- no future impact of future pensions only up to the limit of a government liability (if recognized)